The 80-year-old leader from Karnataka is believed to have sent his resignation to Prime Minister Manmohan Singh in the afternoon, sources said.

Indications are that with the Assembly elections due before next May in Karnataka the former Chief Minister may be given a party assignment in the state.

The resignation is also a clear indication that the Union Council of Ministers is set for a revamp on Sunday with the induction of new faces considered close to Rahul Gandhi and elevation of some young ministers of state.

Whether Gandhi himself would join the government or not was still a matter of speculation though sources say that sometime back he was inclined towards such a possibility.

Krishna was made the External Affairs Minister immediately after the elections in 2009 when UPA came back to power for the second time. His name has been part of speculation before every Cabinet reshuffle.

The resignation also comes in the backdrop of Karnataka Lokayukta ordering a probe against him and two former chief ministers on a complaint alleging irregularities in the Bangalore-Mysore expressway project.

Earlier this week, two senior Congress leaders told ET that the Prime Minister is likely to carry out a major reshuffle of his cabinet on Sunday.

The resignation is a clear indication that the Union Council of Ministers is set for a revamp on Sunday with the induction of new faces considered close to Rahul Gandhi and elevation of some young ministers of state such as Jyotiradhitya Scindia and Sachin Pilot.

The Congress leaders had cautioned that no final decision had been made and sought anonymity because of the sensitivity of the matter. There has been intense speculation about Rahul Gandhi joining the government for some time now. Another senior Congress leader said that if Gandhi does join the government he is likely to be inducted as either the Rural Development minister, a portfolio currently held by Jairam Ramesh or put in charge of Human Resources, headed by Kapil Sibal.

The PM is also likely to induct new faces in his cabinet such as Congress spokesperson Manish Tiwari who has been vigorous in espousing the cause of the Congress in the proceeding of the Joint Parliamentary Committee probing irregular allotment of telecom licenses.

Renuka Chaudhari and Chiranjeevi could also make it to the cabinet in order to increase representation from Andhra Pradesh, electorally a crucial state which contributed as much as 33 MPs out of the Congress' tally of 206 in the 2009 general elections. There is no clarity on whether Petroleum minister Jaipal Reddy would hold on to his portfolio even though the PM is believed to be unhappy with his performance.

The impending reshuffle, which has been in the works for over two months, will see ministers holding dual charge would also be relieved of one ministry. Former deputy chairman of the Rajya Sabha, Rahman Khan is a contender for the minority affairs, a ministry currently held by law minister Salman Khurshid. West Bengal Congress leader Adhir Ranjan Chowdhary could also be inducted, the leaders quoted earlier said.

Chowdhary is said to be close to President Pranab Mukherjee, Steel minister Beni Prasad Verma and Tourism minister Subodh Kant Sahay are likely to be dropped while Agatha Sangma, a nominee of the Nationalist Congress party (NCP) is likely to be replaced by Tariq Anwar.

The shuffling of the deck, inducting the induction of young faces, combined with the recent burst of reforms is intended to send out a signal that the Manmohan Singh-led government, buffeted by numerous scandals, was still capable of purposeful action.

The Congress party that is yet to recover from the fallout of the 2G scam as well as 'coalgate' has recently found itself battling fresh allegations of corruption levelled by activist turned politician Arvind kejriwal against Robert Vadra, the Congress chairperson Sonia gandhi's son-in-law and law minister Salman Khurshid.

Krishna was made the External Affairs Minister immediately after the elections in 2009 when UPA came back to power for the second time. His name has been part of the speculation whenever there was speculation about a Cabinet reshuffle.